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1) The Triple Happiness Mutual Fund's investment portfolio previously included only risk-free assets [say, U

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1) The Triple Happiness Mutual Fund's investment portfolio previously included only risk-free assets [say, U.S. T-bills), and a well-diversified (market) portfolio [say, S&P500], but has no specific investments in real estate. The fund has planned to diversify its investment portfolio to include indirect real estate and considered purchasing shares of three listed real-estate companies. The following table shows the incomplete) estimates of the risk and return characteristics of the share prices of the three companies during the three years ending Nov 2019: beta Real Estate Company Expected Return Standard Deviation (SD) A 10% 12% 4% B Residual standard deviation 18% 13% 13.75% 41.5288% 20% 18% 1.5 0.8 0.5 (a) Suppose company B is mispriced (according to CAPM) and its present expected return is 4.8% (93 : 4.8%). - (i) Compute the Treynor ratio, Sharpe ratio, information ratio of Company B based on its present expected return. (6 marks) (ii) Discuss how an investor who is now holding only market portfolio can achieve higher Sharpe ratio by adjusting his/her portfolio.